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MUNICIPALITY OF SOUTH HURON

FINANCIAL STATEMENTS

SEEBACH & COMPANYChartered Professional Accountants

DECEMBER 31, 2019

Seebach & CompanyChartered Professional Accountants

P.O. Box 758, 41 Ontario StreetCLINTON, ONTARIO N0M 1L0

Tel:(519) 482-7979Fax:(519) 482-5761

[email protected]

INDEPENDENT AUDITOR'S REPORT

To the Members of Council, Inhabitants and Ratepayersof the Corporation of the Municipality of South Huron

Opinion

We have audited the accompanying financial statements of Corporation of the Municipality of SouthHuron ("the Municipality"), which are comprised of the statement of financial position as at December31, 2019 and the consolidated statements of operations, change in net financial assets and cash flowsfor the year then ended, and notes to the financial statements, including a summary of significantaccounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financialposition of the Municipality as at December 31, 2019, and its financial performance and its cash flowsfor the year then ended in accordance with Canadian public sector accounting standards (PSAB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Ourresponsibilities under those standards are further described in the Auditor's Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Municipality in accordancewith the ethical requirements that are relevant to our audit of the financial statements in Canada, andwe have fulfilled our other ethical responsibilities in accordance with these requirements. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements inaccordance with PSAB, and for such internal control as management determines is necessary to enablethe preparation of financial statements that are free from material misstatement, whether due to fraudor error.

In preparing the financial statements, management is responsible for assessing the Municipality's abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and usingthe going concern basis of accounting unless management either intends to liquidate the Municipalityor to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Municipality’s financial reportingprocess.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with Canadian generally accepted auditing standards will always detecta material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions of users taken on the basis of these financial statements.



Tel:(519) 482-7979Fax:(519) 482-5761

[email protected]

INDEPENDENT AUDITOR'S REPORT (continued)

As part of an audit in accordance with Canadian generally accepted auditing standards, we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Municipality's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Municipality's ability to continue asa going concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditor's report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However, future events or conditionsmay cause the Municipality to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.

Chartered Professional AccountantsLicensed Public Accountants

Clinton, OntarioJune 19, 2020


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at December 31 2019 2018

FINANCIAL ASSETS Cash 11,587,913 9,925,035 Taxes receivable 1,104,018 1,063,263 Accounts receivable 3,608,271 2,252,761 Other current assets 19,926 15,057 Investments 9,027,117 8,834,969 Long-term receivables 355,703 364,546 __________ __________

25,702,948 22,455,631 __________ __________

LIABILITIES Accounts payable and accrued liabilities 3,594,576 4,075,538 Deferred revenue 1,572,209 868,789 Landfill closure and post closure liability (note 5) 5,730,100 5,677,400 Municipal debt (note 6) 21,697,996 21,808,732 __________ __________

32,594,881 32,430,459 __________ __________

NET FINANCIAL ASSETS ($ 6,891,933) ($ 9,974,828)

NON-FINANCIAL ASSETS Tangible capital assets, net (note 7) 101,530,653 101,011,897 __________ __________

ACCUMULATED SURPLUS (note 9) $ 94,638,720 $ 91,037,069__________ ____________________ __________

The accompanying notes are an integral part of this financial statement

MUNICIPALITY OF SOUTH HURON CONSOLIDATED STATEMENT OF OPERATIONS

For the year ended December 31 2019 Budget 2019 Actual 2018 Actual

Revenue Taxation for municipal purposes 9,348,327 9,364,049 9,243,949 User fees 8,421,568 8,521,819 9,308,720 Government transfers - Canada and Ontario 3,739,827 3,778,663 2,529,537 Government transfers - other municipalities 361,007 282,178 68,844 Investment income 107,400 470,222 229,631 Penalties and interest 206,100 76,099 164,230 Donations 68,590 101,600 71,126 __________ __________ __________

22,252,819 22,594,630 21,616,037 __________ __________ __________

Expenditure General government 1,927,637 1,841,125 1,669,769 Protection to persons and property 3,633,358 3,611,210 3,329,362 Transportation services 3,749,106 3,765,736 3,610,849 Environmental services 6,069,997 6,780,651 6,520,022 Health services 161,797 161,936 129,833 Recreation and cultural services 2,301,582 2,697,054 2,161,077 Planning and development 62,670 135,267 984,054 __________ __________ __________

17,906,147 18,992,979 18,404,966 __________ __________ __________

Annual surplus (deficit) 4,346,672 3,601,651 3,211,071

Accumulated surplus, beginning of year 91,037,069 91,037,069 87,825,998 __________ __________ __________

Accumulated surplus, end of year $ 95,383,741 $ 94,638,720 $ 91,037,069__________ __________ ____________________ __________ __________



CONSOLIDATED STATEMENT OF CHANGE IN NET FINANCIAL ASSETS

For the year ended December 31 2019 Budget 2019 Actual 2018 Actual

Annual surplus (deficit) 4,346,672 3,601,651 3,211,071 Amortization of tangible capital assets 2,904,477 2,940,080 2,868,874 Net acquisition of tangible capital assets (9,030,460) (3,458,836) (6,541,961) __________ __________ __________

(1,779,311) 3,082,895 (462,016)

Net financial assets, beginning of year (9,974,828) (9,512,812) __________ __________

Net financial assets, end of year ($ 6,891,933) ($ 9,974,828)__________ ____________________ __________



CONSOLIDATED STATEMENT OF CASH FLOW

For the year ended December 31 2019 2018

Operating activities Annual surplus (deficit) 3,601,651 3,211,071 Amortization expense not requiring cash outlay 2,940,080 2,868,874 Decrease (increase) in taxes receivable (40,755) 73,406 Decrease (increase) in accounts receivable (1,355,510) (393,861) Decrease (increase) in other current assets (4,869) 35,839 Increase (decrease) in accounts payable and accrued liabilities (480,962) 960,037 Increase (decrease) in deferred revenue 703,420 139,297 Increase (decrease) in landfill closure & post-closure liability 52,700 55,100 _________ _________ Cash provided by (used for) operating activities 5,415,755 6,949,763 _________ _________

Capital activities Net disposals (purchases) of tangible capital assets (3,458,836) (6,541,961) _________ _________ Cash provided by (used for) capital activities (3,458,836) (6,541,961) _________ _________

Investing activities Decrease (increase) in long-term receivables 8,843 1,429 Decrease (increase) in investments (192,148) (4,023,790) _________ _________ Cash provided by (used for) investing activities (183,305) (4,022,361) _________ _________

Financing activities Proceeds from long-term debt issued 849,419 47,600 Principal repayments on long-term debt (960,155) (914,279) _________ _________ Cash provided by (used for) financing activities (110,736) (866,679) _________ _________

Increase (decrease) in cash position 1,662,878 (4,481,238)

Cash (overdraft) beginning of year 9,925,035 14,406,273 _________ _________

Cash (overdraft) end of year $ 11,587,913 $ 9,925,035_________ __________________ _________



NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 2019

1. Accounting policies

The consolidated financial statements of the Corporation of the Municipality of South Huron are therepresentation of management prepared in accordance with Canadian generally accepted accountingprinciples for local governments as recommended by the Public Sector Accounting Board (PSAB) of theChartered Professional Accountants of Canada.

Significant aspects of accounting policies adopted by the municipality are as follows:

a) Reporting entity

The consolidated financial statements reflect the financial assets, liabilities, operating revenues andexpenditures, Reserves, Reserve Funds, and changes in investment in tangible capital assets of thereporting entity. The reporting entity is comprised of all organizations and enterprises accountable forthe administration of their financial affairs and resources to the Municipality and which are owned orcontrolled by the Municipality. In addition to general government tax-supported operations, theyinclude any water, sewer and waste management systems operated by the municipality and themunicipality's proportionate share of joint local boards.

The following boards and municipal enterprises owned or controlled by Council have beenproportionately consolidated:

Exeter Business Improvement AssociationKirkton-Woodham Swimming Pool

Inter-departmental and inter-organizational transactions and balances are eliminated.

The statements exclude trust funds that are administered for the benefit of external parties.

b) Accrual basis of accountingSources of financing and expenditures are reported on the accrual basis of accounting. The accrualbasis of accounting recognizes revenues as they are earned and measurable, and recognizesexpenditures as they are incurred and measurable as a result of receipt of goods or services and thecreation of a legal obligation to pay.

c) Long-term investmentsInvestments are recorded at cost less amounts written off to reflect a permanent decline in value.

MUNICIPALITY OF SOUTH HURONNOTES TO FINANCIAL STATEMENTS 2 December 31, 2019

1. Accounting policies (continued)

d) Non-financial assetsNon-financial assets are not available to discharge existing liabilities and are held for use in theprovision of services. They have useful lives extending beyond the current year, and are not intendedfor sale in the ordinary course of operations. The change in non-financial assets during the year,together with the excess of revenues over expenses, provides the change in net financial assets forthe year.- Tangible capital assets

Tangible capital assets are recorded at cost, which includes all amounts that are directly attributableto acquisition, construction, development or betterment of the asset. The cost, less residual value,of the tangible capital assets are amortized on a straight-line basis over their estimated useful livesas follows:

Category AmortizationPeriod

CapitalizationThreshold

Land not applicable $ 0Land improvements 25 - 84 years 10,000Buildings 15 - 95 years 10,000Environmental facilities 15 - 60 years 10,000Equipment 5 - 30 years 5,000Vehicles and heavy equipment 5 - 30 years 5,000Transportation infrastructure 0 - 100 years 25,000Watermains infrastructure 20 - 100 years 25,000Sewermains infrastructure 50 - 100 years 25,000Stormsewer infrastructure 75 years 25,000

Assets under construction are not amortized until the asset is available for productive use, at whichtime they are capitalized.Active landfills are amortized annually on the basis on tonnage tipped during the year, as apercentage of the estimated total capacity of the facility. The estimated costs to close and maintaincurrently active landfill sites are based on estimated future expenses in current dollars, adjustedfor estimated inflation, and are charged to expense as the landfill sites capacity is used.The municipality has a capitalized threshold of $0 - $25,000 dependent on the category, so thatindividual tangible capital assets of lesser value are expensed, unless they are pooled because,collectively, they have significant value, or for operational reasons. Examples of pooled assets arecomputer systems, equipment, furniture and fixtures.

- Contribution of tangible capital assetsTangible capital assets received as contributions are recorded at their fair value at the date ofreceipt, and that fair value is also recorded as revenue. Similarly, transfers of assets to third partiesare recorded as an expense equal to the net book value of the asset as of the date of transfer.

- LeasesLeases are classified as capital or operating leases. Leases which transfer substantially all of thebenefits and risks incidental to ownership of property are accounted for as capital leases. All otherleases are accounted for as operating leases and the related lease payments are charged toexpenses as incurred.

- InventoriesInventories held for consumption are recorded at the lower of cost or net realizable value.

e) Reserves for future expendituresCertain amounts, as approved by Council, are set aside in reserves for future operating and capitalexpenditure. Transfers to or from reserves are reflected as adjustments to the respective appropriatedequity.


1. Accounting policies (continued)

f) Government transfersGovernment transfers are recognized in the financial statements as revenues in the period in whichevents giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteriahave been met, and reasonable estimates can be made.

g) Deferred revenueAmounts received and required by legislation, regulation or agreement to be set aside for specific,restricted purposes are reported in the statement of financial position as deferred revenue until theobligation is discharged.

h) Landfill Site Closure and Post-Closure CareLandfill site closure and post-closure care costs are recognized over the operating life of the landfillsite, based on capacity used. The liability is recorded at its discounted value, based on the averagelong-term borrowing rate of the municipality.

i) Amounts to be recovered in future yearsFuture years recoveries represent the requirement of the municipality to raise funds in subsequentperiods to finance unfunded liabilities. A portion of the amounts to be recovered in future years will berecovered from deferred revenues earned.

j) PensionsThe municipality is an employer member of the Ontario Municipal Employees Retirement System(OMERS), which is a multi-employer, defined benefit pension plan. The municipality has adopteddefined contribution plan accounting principles for this plan because insufficient information isavailable to apply defined benefit plan accounting principles. The municipality records as pensionexpense the current service cost, amortization of past service costs and interest costs related to thefuture employer contributions to the plan for past employee service.

k) Use of estimatesThe preparation of financial statements in conformity with Canadian public sector accountingstandards requires management to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements, the reported amounts of revenues and expenditures during the period, and theaccompanying notes. Due to the inherent uncertainty in making estimates, actual results could differfrom those estimates.

2. Operations of school boards and county

Taxation levied for school board and county purposes are not reflected in the financial statements. Theamounts transferred were:

2019 2018County of Huron $ 6,807,544 $ 6,734,169School Boards 3,904,945 3,850,548


3. Trust funds

Trust funds administered by the municipality amounting to $876,883 (2017 : $858,752) have not beenincluded in the statement of financial position nor have their operations been included in the consolidatedstatement of financial activities.

4. Pension agreements

The municipality makes contributions to a multi-employer pension plan on behalf of members of its staff. The plan is a defined benefit plan which specifies the amount of the retirement benefit to be received bythe employees based on the length of service and rates of pay. The amount contributed for 2019 was$314,959 (2018 : $265,217) for current services and is included as an expenditure on the consolidatedstatement of financial activities.

The contributions to the Ontario Municipal Employers Retirement System ("OMERS"), a multi-employerdefined benefit pension plan, are expensed when contributions are due. Any pension surpluses or deficitsare a joint responsibility of Ontario municipal organizations and their employees. As a result, themunicipality does not recognize any share of the OMERS pension surplus or deficit.

5. Landfill closure and post closure cost liability

Closure and post-closure care requirements are defined in accordance with industry standards and includefinal covering and landscaping of the landfill site, removal of ground water and leechates, and ongoingenvironmental monitoring, site inspections and maintenance. These costs will be incurred when the landfillsite stops accepting waste, with the post-closure care expected to continue for an additional 25 - 160 years.

The municipality operates three landfill sites: South Huron, Stephen and Usborne. At December 31, 2019,the municipality has recognized a liability of $5,730,100 (2018 : $5,677,400). This represents the presentvalue of the total estimated costs, and is based on a discount rate of 2%. The liability is recorded basedon the capacity of the landfill used to date.

The reported liability is based on estimates and assumptions with respect to events extending over a long-term period using the best information available to management. Future events may result in significantchanges to the estimated total expenditures, capacity and liability. Any changes in these estimates wouldbe recognized in the year the change is identified.

The closure and post-closure care costs are expected to be funded in the year incurred.


6. Municipal debt

The balance of the long-term liabilities reported on the consolidated statement of financial position is madeup of the following:

2019 2018Ontario Municipal Economic Infrastructure FinancingAuthority (OMEIFA) loan payable, 2.83% interest,$26,329 blended payment payable semi-annually, dueJune 2024 (for Exeter water and sewer purposes) 221,027 266,462

Lake Huron Water Supply System / City of Londonloan payable, due on demand (for water purposes) 195,254 230,829

Ontario Infrastructure Projects Corporation (OIPC)loan payable, 4.87% interest, $197,862 blendedpayment payable semi-annually, due December 2046(for Huron Park water and sewer purposes) 5,909,335 6,013,456

Ontario Infrastructure Projects Corporation (OIPC)loan payable, 5.32% interest, $20,157 blendedpayment payable semi-annually, due July 2047 (forsewer purposes) 583,568 592,479

Ontario Infrastructure Projects Corporation (OIPC)loan payable, 5.09% interest, $185,842 blendedpayment payable semi-annually, due August 2028 (forCrediton/Centralia sewer purposes) 2,657,141 2,884,848

Ontario Infrastructure Projects Corporation (OIPC)loan payable, 5.02% interest, $383,668 blendedpayment payable semi-annually, due December 2034(for Hensall-Exeter water purposes) 8,019,588 8,371,054

Ontario Infrastructure and Lands Corporation (OILC)loan payable, 4.04% interest, $32,371 blendedpayment payable semi-annually, due December 2033(for recreation purposes) 687,106 722,997

Ontario Infrastructure and Lands Corporation (OILC)loan payable, 3.18% interest, $83,296 blendedpayment payable semi-annually, due December 2037(for Grand Bend sewer purposes) 2,269,855 2,362,061

Ontario Infrastructure and Lands Corporation (OILC)loan payable, 2.26% interest, $84,994 blendedpayment payable semi-annually, due November 2024(for Exeter Pool recreation purposes) 799,419 -

21,342,293 21,444,186

Tile drain loans payable to Ministry of Finance,responsibility for payment of principal and interestcharges have been assumed by individuals, 6% - 8%,due 2020 through 2029 355,703 364,546

$ 21,697,996 $ 21,808,732

Principal payments due on tile drainage loans and recoverable from landowners in the next five years are as follows:

2020: $57,600 2021: $61,000 2022: $56,600 2023: $46,400 2024: $38,100

Principal payments recoverable from property owners in the next five years to finance the bank demand and term loans and municipal debentures are:

2020: $1,059,400 2021: $1,105,800 2022: $1,154,400 2023: $1,205,200 2024: $1,232,100


7. Tangible capital assets

The municipality’s policy on accounting for tangible capital assets follows:i) Contributed tangible capital assets

The municipality records all tangible capital assets contributed by external parties at fair value.ii) Tangible capital assets recognized at nominal value

Certain assets have been assigned a nominal value because of the difficulty of determining a tenablevaluation.

For additional information, see the Consolidated Schedule of Tangible Capital Assets information on thetangible capital assets of the municipality by major class and by business segment, as well as foraccumulated amortization of the assets controlled.

8. Segmented information

The Municipality of South Huron is a diversified municipal government institution that provides a wide rangeof services to its citizens such as recreational and cultural services, planning and development, fire, andtransportation services. Distinguishable functional segments have been separately disclosed in thesegmented information. The nature of the segments and the activities they encompass are as follows:

General GovernmentThis segment relates to the general operations of the municipality itself and cannot be directly attributedto a specific segment.

Protection to Persons and PropertyProtection is comprised of fire protection, policing, court services, conservation authorities, protectiveinspection and control, building permit and inspection services, emergency measures and other protectionservices.

TransportationTransportation services include road maintenance, winter control services, storm sewer system, street lightmaintenance, parking lots, equipment maintenance and other transportation services.

Environmental ServicesEnvironmental services include the sanitary sewer system, waterworks, waste collection, waste disposaland recycling.

Health ServicesThis service area includes cemeteries and other health services.

Recreational and Cultural ServicesThis service area provides public services that contribute to the provision of recreation and leisure facilitiesand programs, the maintenance of parks and open spaces, library services, museums and other culturalservices.

Planning and DevelopmentThis segment includes matters relating to zoning and site plan controls, land acquisition, developmentinitiatives, agriculture and reforestation, municipal drainage and tile drainage.

For additional information, see the schedule of segmented information.


9. Accumulated surplus

The accumulated surplus consists of individual fund surplus/(deficit) amounts and reserve and reservefunds as follows:

2019 2018General revenue accumulated surplus and invested in tangible capital assets $ 77,982,293 $ 76,144,458Landfill closure and post-closure liability (5,730,100) (5,677,400)Kirkton-Woodham Swimming Pool 9,882 4,566Exeter BIA 27,486 17,225Reserves and reserve funds 22,349,159 20,548,220

$ 94,638,720 $ 91,037,069

For additional information, see the Consolidated Schedule of Continuity of Reserves, Reserve Funds, andObligatory Deferred Revenue.

10. Financial instrument risk management

Credit risk

The Municipality is exposed to credit risk through its cash, trade and other receivables, loans receivable,and long-term investments. There is the possibility of non-collection of its trade and other receivables. Themajority of the Municipality’s receivables are from ratepayers and government entities. For trade and otherreceivables, the Municipality measures impairment based on how long the amounts have been outstanding.For amounts outstanding considered doubtful or uncollectible, an impairment allowance is setup.

Liquidity risk

Liquidity risk is the risk that the Municipality will not be able to meet its financial obligations as they fall due.The Municipality has a planning and a budgeting process in place to help determine the funds required tosupport the Municipality’s normal operating requirements on an ongoing basis. The Municipality ensuresthat there are sufficient funds to meet its short-term requirements, taking into account its anticipated cashflows from operations and its holdings of cash and cash equivalents. To achieve this aim, it seeks tomaintain an available line of credit balance as approved by the appropriate borrowing bylaw to meet, at aminimum, expected requirements.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates or interest rates willaffect the Municipality's income or the value of its holdings of financial instruments. The objective of marketrisk management is to control market risk exposures within acceptable parameters while optimizing returnon investments.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuatebecause of changes in market interest rates. The Municipality is exposed to interest rate risk arising fromthe possibility that changes in interest rates will affect the variable rate of temporary borrowings and long-term liabilities and the value of fixed rate long-term liabilities.

There has been no significant changes from the previous year in the exposure to risk or policies,procedures and methods used to measure risks.


11. Budget amounts

Under Canadian public sector accounting standards, budget amounts are to be reported on theconsolidated statement of financial activities for comparative purposes. The 2019 budget amounts for theCorporation of the Municipality of South Huron approved by Council are unaudited and have been restatedto conform to the basis of presentation of the revenues and expenditures on the consolidated statementof activities. Budget amounts were not available for certain boards consolidated by the municipality. Thebudget figures have not been audited.

MUNICIPALITY OF SOUTH HURON Consolidated Schedule of Tangible Capital Assets For the Year Ended December 31, 2019

Roads and Underground Assets TOTAL TOTAL Land Buildings Vehicles Other Land and other Under Net Book Value Net Book Value

Improvements Networks Construction 2019 2018

Cost Balance, beginning of year 1,882,882 9,084,068 7,228,561 731,044 57,277,535 77,813,891 4,090,119 158,108,100 152,588,716 Add: Additions during the year 195,474 182,703 75,717 2,123,373 3,569,074 (1,976,890) 4,169,451 7,123,269 Less: Disposals during the year (188,094) (56,697) (177,422) (1,472,250) (23,035) (1,917,498) (1,603,885) ________ ________ ________ _______ _________ _________ _________ __________ __________Balance, end of year 1,882,882 9,279,542 7,223,170 750,064 59,223,486 79,910,715 2,090,194 160,360,053 158,108,100 ________ ________ ________ _______ _________ _________ _________ __________ __________

Accumulated AmortizationBalance, beginning of year 3,759,272 4,196,691 347,256 24,191,610 24,601,374 57,096,203 55,249,906 Add: Amortization during the year 217,989 353,317 51,375 1,106,248 1,211,151 2,940,080 2,868,874 Less: Accumulated amortization on disposals (141,075) (50,928) (165,770) (849,110) (1,206,883) (1,022,577) ________ ________ ________ _______ _________ _________ _________ __________ __________Balance, end of year - 3,977,261 4,408,933 347,703 25,132,088 24,963,415 - 58,829,400 57,096,203 ________ ________ ________ _______ _________ _________ _________ __________ __________

Net Book Value of

Tangible Capital Assets 1,882,882 5,302,281 2,814,237 402,361 34,091,398 54,947,300 2,090,194 $ 101,530,653 $ 101,011,897________ ________ ________ _______ _________ _________ _________ __________ __________________ ________ ________ _______ _________ _________ _________ __________ __________

General Infrastructure

MUNICIPALITY OF SOUTH HURON Consolidated Schedule of Tangible Capital Assets For the Year Ended December 31, 2019

TOTAL TOTAL General Protection Transportation Environmental Health Recreation Work in Net Book Value Net Book Value

Government and Cultural Process 2019 2018

Cost Balance, beginning of year 1,412,747 3,863,546 68,085,291 72,149,924 175,633 8,330,840 4,090,119 158,108,100 152,588,716 Add: Additions during the year 31,131 58,704 (9,132,914) 15,025,075 164,345 (1,976,890) 4,169,451 7,123,269 Less: Disposals during the year (237,288) (177,422) (1,472,250) (7,503) (23,035) (1,917,498) (1,603,885) ________ ________ _________ _________ ________ ________ _________ __________ __________Balance, end of year 1,443,878 3,684,962 58,774,955 85,702,749 175,633 8,487,682 2,090,194 160,360,053 158,108,100 ________ ________ _________ _________ ________ ________ _________ __________ __________

Accumulated AmortizationBalance, beginning of year 712,755 1,956,327 22,985,134 28,475,473 61,764 2,904,750 57,096,203 55,249,906 Add: Amortization during the year 54,716 140,383 1,102,429 1,409,907 6,444 226,201 2,940,080 2,868,874 Less: Accumulated amortization on disposals (185,500) (165,770) (849,111) (6,502) (1,206,883) (1,022,577) ________ ________ _________ _________ ________ ________ _________ __________ __________Balance, end of year 767,471 1,911,210 23,921,793 29,036,269 68,208 3,124,449 - 58,829,400 57,096,203 ________ ________ _________ _________ ________ ________ _________ __________ __________

Net Book Value of

Tangible Capital Assets 676,407 1,773,752 34,853,162 56,666,480 107,425 5,363,233 2,090,194 $ 101,530,653 $ 101,011,897________ ________ _________ _________ ________ ________ _________ __________ __________________ ________ _________ _________ ________ ________ _________ __________ __________

MUNICIPALITY OF SOUTH HURON Consolidated Schedule of Continuity of Reserves, Reserve Funds and Deferred Revenue For the Year Ended December 31, 2019

Balance, Transfers out Balance, beginning Interest From Other Utilized end

of year Operations During Year of year

Reserves and reserve funds Reserves

for general government 3,412,508 628,840 (411,819) 3,629,529 for protection services 1,257,231 190,769 - 1,448,000 for transportation services 2,917,899 1,293,687 (107,090) 4,104,496 for environmental services 9,661,732 1,315,324 (1,803,884) 9,173,172 for health services 105,535 6,679 - 112,214 for recreation and cultural services 532,721 279,132 (55,264) 756,589 __________ _______ ________ _______ ________ __________

17,887,626 - 3,714,431 - (2,378,057) 19,224,000 __________ _______ ________ _______ ________ __________

Reserve funds Amenity fee community funding 416,456 11,219 350,004 (84,500) 693,179 Modernization funding - - 625,482 (32,570) 592,912 Webber gravel pit 34,125 898 35,023 Building code 1,173,553 30,849 (137,504) 1,066,898 Exeter community development 389,866 (389,866) - Dashwood community development 81,492 2,142 83,634 Exeter cemetery expansion 492 847 1,339 Exeter cemetery columbarium 32,383 17 7,267 39,667 Landfill perpetual care 504,672 13,267 66,289 584,228 South Huron recreation centre 27,555 724 28,279 __________ _______ ________ _______ ________ __________

2,660,594 59,963 1,049,042 - (644,440) 3,125,159 __________ _______ ________ _______ ________ __________

Total reserves and reserve funds 20,548,220 59,963 4,763,473 - (3,022,497) 22,349,159 __________ _______ ________ _______ ________ __________

Deferred revenue Parkland 78,187 2,055 3,500 83,742 Federal Gas Tax Funds 10,181 268 628,932 (210,444) 428,937 OCIF formula-based component 77,781 2,045 673,392 (406,414) 346,804 Mainstreet Revitalization 46,577 1,224 47,801 Ontario Cannabis Legalization Fund - 18,450 18,450 Development charges 656,063 17,246 42,282 (69,116) 646,475 __________ _______ ________ _______ ________ __________

868,789 22,838 1,320,774 45,782 (685,974) 1,572,209 __________ _______ ________ _______ ________ __________

Total $ 21,417,009 82,801 6,084,247 45,782 (3,708,471) $ 23,921,368__________ _______ ________ _______ ________ ____________________ _______ ________ _______ ________ __________

Revenues and contributions


Segmented Information For the Year Ended December 31, 2019

General Protective Transportation Environmental Health Recreation Planning and Total Total Government Services Services Services Services and Culture Development 2019 2018

Revenue

Taxation 9,364,049 9,364,049 9,243,949

User charges 690,371 86,887 101,904 6,769,882 82,029 699,797 56,746 8,487,616 9,308,720

Government transfers 2,542,370 39,888 290,888 920,945 224,648 4,018,739 2,598,381

Interest and penalties 546,321 546,321 393,861

Other 101,600 101,600 71,126 _________ ________ ________ ________ _______ ________ ________ __________ __________

13,244,711 126,775 392,792 7,690,827 82,029 924,445 56,746 22,518,325 21,616,037 _________ ________ ________ ________ _______ ________ ________ __________ __________

Operating expenditure

Wages, salaries and benefits 1,353,663 812,089 919,541 962,543 86,729 1,166,615 15,737 5,316,917 4,797,869

Contract services 85,343 2,036,559 295,140 1,597,853 17,691 226,946 16,786 4,276,318 3,328,265

Supplies, materials, equipment and interest 347,403 570,391 1,426,761 2,197,420 51,072 1,053,258 26,439 5,672,744 6,828,649

Loss on disposal of tangible capital assets - 51,788 21,865 612,928 - 24,034 - 710,615 581,309

Amortization 54,716 140,383 1,102,429 1,409,907 6,444 226,201 - 2,940,080 2,868,874 _________ ________ ________ ________ _______ ________ ________ __________ __________

1,841,125 3,611,210 3,765,736 6,780,651 161,936 2,697,054 58,962 18,916,674 18,404,966 _________ ________ ________ ________ _______ ________ ________ __________ __________

Net revenue (expense) 11,403,586 (3,484,435) (3,372,944) 910,176 (79,907) (1,772,609) (2,216) 3,601,651 3,211,071 _________ ________ ________ ________ _______ ________ ________ __________ ___________________ ________ ________ ________ _______ ________ ________ __________ __________



Tel:(519) 482-7979Fax:(519) 482-5761

[email protected]

INDEPENDENT AUDITOR'S REPORT

To the Members of Council, Inhabitants and Ratepayers of the Corporation of the Municipality of South Huron

Opinion

We have audited the accompanying financial statements of the trust funds of the Corporation of theMunicipality of South Huron ("the Municipality"), which are comprised of the balance sheet as at December31, 2019 and the statement of continuity of trust funds for the year then ended, and notes to the financialstatements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financialposition of the Municipality as at December 31, 2019, and its financial performance and its cash flows for theyear then ended in accordance with Canadian public sector accounting standards (PSAB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Ourresponsibilities under those standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are independent of the Municipality in accordance with theethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilledour other ethical responsibilities in accordance with these requirements. We believe that the audit evidencewe have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordancewith PSAB, and for such internal control as management determines is necessary to enable the preparationof financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Municipality's ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Municipality or to ceaseoperations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Municipality’s financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor's report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conductedin accordance with Canadian generally accepted auditing standards will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basisof these financial statements.



Tel:(519) 482-7979Fax:(519) 482-5761

[email protected]

INDEPENDENT AUDITOR'S REPORT (continued)

As part of an audit in accordance with Canadian generally accepted auditing standards, we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraudor error, design and perform audit procedures responsive to those risks, and obtain audit evidence thatis sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Municipality's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Municipality's ability to continue as a going concern.If we conclude that a material uncertainty exists, we are required to draw attention in our auditor'sreport to the related disclosures in the financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Municipality to cease to continueas a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control thatwe identify during our audit.

Chartered Professional AccountantsLicensed Public Accountants

Clinton, OntarioJune 19, 2020

MUNICIPALITY OF SOUTH HURON TRUST FUNDS

STATEMENT OF CONTINUITY

For the Year Ended December 31, 2019 Perpetual Niche Five-Year Perpetual Monuments

Care Care Flower Pre-need Flower MarkerFund Fund Fund Fund Fund Fund 2019 2018

Balance beginning of year 358,393 34,087 15,468 101,095 286,964 62,745 858,752 842,367 ________ _______ _______ _______ ________ _______ ________ ________Receipts

Perpetual care 9,064 1,900 10,964 7,316 Donations and capital contributions 2,565 6,830 6,447 15,842 19,534 Interest earned 23,913 23,913 17,378 ________ _______ _______ _______ ________ _______ ________ ________

32,977 2,565 6,830 6,447 - 1,900 50,719 44,228 ________ _______ _______ _______ ________ _______ ________ ________Expenditure

Transfers to cemetery 23,913 6,776 1,899 32,588 27,843 ________ _______ _______ _______ ________ _______ ________ ________ 23,913 - 6,776 1,899 - - 32,588 27,843 ________ _______ _______ _______ ________ _______ ________ ________

Balance end of year $ 367,457 $ 36,652 $ 15,522 $ 105,643 $ 286,964 $ 64,645 $ 876,883 $ 858,752________ _______ _______ _______ ________ _______ ________ ________________ _______ _______ _______ ________ _______ ________ ________

BALANCE SHEET

As at December 31 2019 2018

Assets Cash 7,809 6,045 Investments, cost 889,566 871,725

Liabilities Due to general fund (20,492) (19,018) ________ ________

Trust fund net asset balances $ 876,883 $ 858,752________ ________________ ________


TRUST FUNDS

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 2019

1. Accounting Policies

Significant aspects of accounting policies adopted by the municipality are as follows:

a) Management responsibilityThe financial statements of the Trust Funds are the representations of management. They have beenprepared in accordance with Canadian public sector accounting standards as recommended by thePublic Sector Accounting Board (PSAB) of the Chartered Professional Accountants of Canada andprescribed by the Ministry of Municipal Affairs and Housing for municipalities and their related entities.

b) Basis of consolidationThese trust funds have not been consolidated with the financial statements of the Municipality of SouthHuron.

c) Basis of accountingCapital receipts and income are reported on the cash basis of accounting. Expenditures are reportedon the cash basis of accounting with the exception of administration expenses which are reported onthe accrual basis of accounting, which recognizes expenditures as they are incurred and measurableas a result of receipt of goods or services and the creation of a legal obligation to pay.

d) InvestmentsInvestments are recorded at cost less amounts written off to reflect a permanent decline in value.

e) Use of estimatesThe preparation of financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,and the reported amounts of revenues and expenditures during the period. Actual results could differfrom those estimates.

2. Investments

Trust fund investments have a market value equal to cost of $ 889,566 (2018 : $ 871,725).

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